Host country laws influence performance of co's; Chinese investment overseas to continue; new survey in 2016

Having developed a massive 305GW in hydropower within the country, Chinese companies and banks have branched out beyond their borders to become the biggest builders and financiers of hydropower projects in the world. To date, they are involved in some 330 hydropower projects in 74 countries.

For eight years, International Rivers (IR) has been engaging with Chinese companies to advocate for improved policies and practices and to encourage them to compete for a strong environmental track record. Information supplied to the companies by IR has helped them decide to cancel or mitigate dams they have themselves pronounced “unstable” and “uncontrollable,” and which would have harmed the environment and communities that are dependent upon rivers.This past summer, IR released the first-ever report that benchmarks and ranks the policies and some of the overseas projects for seven Chinese state-owned hydropower companies. The report is available in English and Chinese.More on the report and the results below.

Benchmarking Chinese Overseas Hydropower Companies

The participating seven state-owned hydropower companies are now some of the largest and most influential hydropower companies in the world. They are:

The Benchmarking Report evaluates 26 indicators across three categories:

Environmental Management;

Communities and Labour Relations; and

Risk Management.

It provides scientific and evidence-based analysis on these three themes and shows the concern by companies over maintaining a positive image abroad.

6/7 companies were active throughout the process… Huaneng Group only responded after facing criticism

Six out of the seven companies were active throughout the process of collecting data from the headquarters and/or arranging site visits to meet with managers and workers at the project sites. Sinohydro, Three Gorges and Gezhouba were particularly engaged throughout the research and compilation phases.The only company that was not responsive during the research phase was Huaneng, which is working through its subsidiary company HydroLancang to build the Lower Sessan 2 Dam in Cambodia, the largest dam in the country, as its first overseas hydropower project.But when the report came out HydroLancang engaged with us. It sent top-level executives to Beijing in order to initiate a dialogue with us after coming under criticism by its parent company because the project which was reviewed was the second-worst-performing in the Benchmarking Report.

The Ministry of Commerce was particularly receptive

The Ministry of Commerce was particularly receptive to our work as it is developing a mechanism to encourage Chinese companies to implement better projects even when the legal requirements in host countries are low.Chinese companies are interested in seeing how they stack up compared with other Chinese companies. They are also interested to know how they compare to international hydropower companies.

Findings show significant gaps between policy commitments and performance

The report revealed that there are significant gaps between policy commitments and performance on the ground. Most companies talk the talk, but don’t necessarily walk the walk. The cost is borne by those who can least afford it – rural communities and fragile ecosystems.As for individual performance, Sinohydro International had the strongest record in both policies and projects. Meanwhile, Huaneng had the weakest ranking for policy commitments and Datang had the weakest ranking for projects.

Generally, companies that build projects as contractors perform better than companies that invest in and own their projects;

At the policy level, all the companies received their highest scores for dam safety measures. In practice, companies performed better when implementing environmental standards than standards relating to host communities, workers and general risk management; and

Companies often have their own environmental, social and corporate responsibility guidelines and follow guidelines from the Ministries of Commerce and Foreign Affairs and other government institutions. It is important to acknowledge and understand how the companies incorporate these into their work, rather than guidelines that are more common internationally. In some cases, Chinese company guidelines are similar to World Bank, United Nations or human rights and business practices.

Huge appetite for investing overseas to drive more projects but also better brand management

With a huge appetite for investing overseas, Chinese companies are interested in finding out how they can improve their reputation and image abroad.

Project will run again in 2016 and expand beyond Chinese dam-builders

The benchmarking work by International Rivers provides an incentive for companies to compete on their environmental and social track records rather than simply on financial grounds. The Benchmarking Project will be repeated in 2016 and will expand to include non-Chinese dam builders.

Further Reading

China Water Risk’s 5 Trends for 2016 – Prioritizing environment alongside employment signals a reshuffle. To show it’s serious, China will “kill a chicken to warn the monkey”. The Year of the Monkey brings with it wild swings, so check out our top 5 trends in water for 2016 for it is better to be in a position to disrupt than be disrupted

Be Green and Prosper – With increased fines, penalties and jail sentences, China Water Risk’s McGregor & Liu expand on China’s push towards ‘all things green’. Also hear from top business leaders in China on why it pays to be green to prosper

Developing A Global Water Stewardship System – Alliance for Water Stewardship’s Zhenzhen Xu, Ma Xi & Michael Spencer introduce the first ever global water stewardship standard and share lessons learnt from Ecolab’s pilot at their Taicang China chemical plant

Renewable Energy: Bigger Than You Think – Renewables surge as coal wanes but the bulk of the renewable energy boom is yet to come. CWR’s Thieriot on why this aggressive surge won’t be enough to solve the climate-energy nexus

No Need to Sacrifice Rivers for Power – International Rivers China Program Director Grace Mang warns of prematurely celebrating China’s lower coal targets as 500GW of ‘clean’ hydro by 2050 brings its own risks. The time to discuss a ‘river conservation’ scenarios versus a ‘high renewable’ scenario is now

Small Hydro: The Future Is Green – We talked to Director-General of the International Center on Small Hydro Power. Prof. Dr. Heng Liu on small hydro in China & its role in China’s power mix to ensure energy security & combat climate change

Author: Stephanie Jensen-Cormier

Stephanie is the China program director at International Rivers, an organization that was established in 1985 to protect rivers, the environment, and the people which depend upon them.The China program works to protect Asia’s key rivers and promote higher environmental and social standards in Chinese hydropower projects around the world. Stephanie has been engaged in environmental work in China since 2005. Her specialization on China is driven by her conviction of this country’s importance on the global stage. Prior to joining International Rivers in 2015, Ms. Jensen-Cormier was the program director at a China-based environmental education NGO. She has also worked with the International Labor Organization and the China Council for International Cooperation on Environment and Development. Ms. Jensen-Cormier has a Bachelor Degree from the University of Victoria in British Columbia and earned her Master Degree from the Weatherhead East Asian Institute at Columbia University in New York City. Read more from Stephanie Jensen-Cormier →